THE PROVINCIAL INSOLVENCY ACT, 1920
(Act V of 1920)
C O
N T E N T S
Section Heading
Part I
Constitution and Powers of Court
1. Short title and extent.
2. Definitions.
3. Insolvency Jurisdiction.
4. Power of Court to decide all questions
arising in insolvency.
5. General powers
of Courts.
Part II
Proceedings from Act of
Insolvency to Discharge
Acts of
Insolvency
6. Acts of insolvency.
Petition
7. Petition and adjudication.
8. Exemption of corporation etc., from insolvency
proceedings.
9. Conditions on which creditor may
petition.
10. Conditions on which debtor may
petition.
11. Court to which petition shall be
presented.
12. Verification of petitions.
13. Contains of petition.
14. Withdrawal of petitions.
15. Consolidation of petitions.
16. Power to change carriage of
proceedings.
17. Continuance of proceedings on death of
debtor.
18. Procedure for admission of petition.
19. Procedure on admission of petition.
20. Appointment of interim receiver.
21. Interim proceeding against debtor.
22. Duties of debtors.
23. Release of debtor.
24. Procedure at hearing.
25. Dismissal of petition.
26. Award of compensation.
Order of
Adjudication
27. Order of adjudications.
28. Effect of an order of adjudication.
29. Stay of pending proceeding.
30. Publication of order of adjudication.
Proceedings
consequent on order of Adjudication
31. Protection order.
32. Power to arrest after adjudication.
33. Schedule of creditors.
34. Debts provable under the Act.
Annulment of
Adjudication
35. Power to annual adjudication of
insolvency.
36. Power to cancel one of concurrent
orders of adjudication.
37. Proceedings on annulment.
Compositions
and schemes of arrangement
38. Compositions and schemes of
arrangement.
39. Order on approval.
40. Power to re-adjudge debtor insolvent.
Discharge
41. Discharge.
42. Cases in which Court must refuse an
absolute discharge.
43. Adjudication to be annulled on failure
to apply for discharge.
44. Effect of order of discharge.
Part III
Administration of Property
Method of Proof
of debts
45. Debts payable at a future time.
46. Mutual dealing and set-off.
47. Secured creditors.
48. Interest.
49. Mode of proof.
50. Disallowance and reduction of entries
in schedule.
Effect of
insolvency on antecedent transactions
51. Restriction of rights of creditor
under execution.
52. Duties of Court executing decree as to property taken in
execution.
53. Avoidance of voluntary transfer.
54. Avoidance of preference in certain cases.
54A. By whom
petitions for annulment may be made.
55. Protection of bona fide
transaction.
Realisation of Property
56. Appointment of receiver.
57. Power to appoint Official Receivers.
58. Powers of Court if no receiver
appointed.
59. Duties and powers of receiver.
59A. Power to require information regarding
insolvent’s property.
60. Special provisions in regard to
immoveable property.
Distribution of
Property
61. Priority of debts.
62. Calculation of dividends.
63. Right of creditor who has not proved debt before
declaration of a dividend.
64. Final dividend.
65. No suit for dividend.
66. Management by and allowance to
insolvent.
67. Right of insolvent to surplus.
67A. Committee of inspection.
Appeal to Court
against receiver
68. Appeal to Court against receiver.
Part IV
Penalties
69. Offences by debtors.
70. Procedure on charge under section 69.
71. Criminal liability after discharge or
composition.
72. Undischarged
insolvent obtaining credit.
73. Disqualifications of insolvent.
Part V
Summary Administration
74. Summary administration.
Part VI
Appeals
75. Appeals.
Part VII
Miscellaneous
76. Costs.
77. Courts to be auxiliary to each other.
78. Limitation.
79. Power to make rules.
80. Delegation of powers to Official
Receivers.
81. Power of Provincial Government to bar application of
certain provisions to certain Courts.
82. [Omitted].
83. Repeal.
Schedules
[1]THE
PROVINCIAL INSOLVENCY ACT, 1920
(Act V of 1920)
[25 February 1920]
An Act to consolidate and amend the Law
relating to Insolvency [2][* * *],
as administered by Courts having jurisdiction [3][in the
WHEREAS it is expedient
to consolidate and amend the law relating to insolvency [4][* * *], as
administered by Courts having jurisdiction [5][in the
1. Short title and extent.– (1) This Act
may be called the Provincial Insolvency Act, 1920.
[6][(2) It extends to the whole of the
2. Definitions.– (1) In this Act,
unless there is anything repugnant in the subject or context,–
(a) “creditor” includes a decree-holder, “debt” includes a
judgment-debt, and “debtor” includes a judgment debtor;
[7][(b) “District Court” means the principal Civil
Court of original jurisdiction in any area;]
[8][(bb) “Government” means
Government of the
(c) “prescribed” means
prescribed by rules made under this Act;
(d) “property” includes
any property over which or the profits of which any person has a disposing
power which he may exercise for his own benefit;
(e) “secured creditor”
means a person holding a mortgage, charge or lien on the property of the debtor
or any part thereof as a security for a debt due to him from the debtor; and
(f) “transfer of property”
includes a transfer of any interest in property and the creation of any charge
upon property.
(2) Words
and expressions used in this Act and defined in the Code of Civil Procedure,
1908, and not hereinbefore defined shall have the same meanings as those
respectively attributed to them by the said Code.
Part I
Constitution and Powers of Court
3. Insolvency Jurisdiction.– (1) The
District Courts shall be the Courts having jurisdiction under this Act:
Provided that
the [9][Government] may, by notification in the [10][official Gazette], invest any Court subordinate to a District Court
with jurisdiction in any class of cases, and any Court so invested shall within
the local limits of its jurisdiction have concurrent jurisdiction with the
District Court under this Act.
(2) For
the purposes of this Act, a Court of Small Causes shall be deemed to be subordinate
to the District Court.
4. Power of Court to decide all
questions arising in insolvency.– (1) Subject to the
provisions of this Act, the Court shall have full power to decide all questions
whether of title or priority, or of any nature whatsoever, and whether
involving matters of law or of fact, which may arise in any case of insolvency
coming within the cognizance of the Court, or which the Court may deem it
expedient or necessary to decide for the purpose of doing complete justice or
making a complete distribution of property in any such case.
(2) Subject
to the provisions of this Act and notwithstanding anything contained in any
other law for the time being in force, every such decision shall be final and
binding for all purposes as between, on the one hand, the debtor and the
debtor's estate and, on the other hand, all claimants against him or it and all
persons claiming through or under them or any of them.
(3) Where
the Court does not deem it expedient or necessary to decide any question of the
nature referred to in sub-section (1), but has reason to believe that the
debtor has a saleable interest in any property, the Court may without further
inquiry sell such interest in such manner and subject to such conditions as it
may think fit.
5. General powers of Courts.– (1) Subject to
the provisions of this Act, the Court, in regard to proceedings under this Act,
shall have the same powers and shall follow the same procedure as it has and
follows in the exercise of original civil jurisdiction.
(2) Subject
as aforesaid, [11][Lahore High
Court] and District Courts, in regard to proceedings under this Act in Courts
subordinate to them, shall have the same powers and shall follow the same
procedure as they respectively have and follow in regard to civil suits.
Part II
Proceedings from Act of Insolvency
to Discharge
Acts of
Insolvency
6. Acts of insolvency.– A debtor
commits an act of insolvency in each of the following cases, namely:-
(a) if, in [12][the
(b) if, in [13][the
(c) if, in [14][the Punjab], he
makes any transfer of his property, or of any part thereof, which would, under
this or any other enactment for the time being in force, be void as a
fraudulent preference if he were adjudged an insolvent;
(d) if, with intent to defeat or delay his creditors,–
(i) he departs or
remains out of [15][the
(ii) he departs from his
dwelling-house or usual place of business or otherwise absents himself;
(iii) he secludes himself
so as to deprive his creditors of the means of communicating with him;
(e) if any of his
property has been sold in execution of the decree of any Court for the payment
of money;
(f) if he petitions to be
adjudged an insolvent under the provisions of this Act;
(g) if he gives notice to
any of his creditors that he has suspended, or that he is about to suspend,
payment of his debts; or
(h) if he is imprisoned
in execution of the decree of any Court for the payment of money.
Explanation.– For the purposes of this section the act of an
agent may be the act of the principal.
Petition
7. Petition and adjudication.– Subject to the
conditions specified in this Act, if a debtor commits an act of insolvency, an
insolvency petition may be presented either by a creditor or by the debtor, and
the Court may on such petition make an order (hereinafter called an order of
adjudication) adjudging him an insolvent.
Explanation.– The presentation of a petition by the debtor shall
be deemed an act of insolvency within the meaning of this section, and on such
petition the Court may make an order of adjudication.
8. Exemption of corporation etc., from
insolvency proceedings.– No insolvency petition shall be presented against
any corporation or against any association or company registered under any
enactment for the time being in force.
9. Conditions on which creditor may petition.–
(1) A creditor shall not be entitled to present an insolvency petition against
a debtor unless-
(a) the debt owing by the debtor to the creditor,
or if two or more creditors join in the petition, the aggregate amount of debts
owing to such creditors, amounts to five hundred rupees, and
(b) the debt is a
liquidated sum payable either immediately or at some certain future time, and
(c) the
act of insolvency on which the petition is grounded has occurred within three
months before the presentation of the petition.
(2) If the petitioning creditor is a
secured creditor, he shall in his petition either state that he is willing to
relinquish his security for the benefit of the creditors in the event of the
debtor being adjudged insolvent, or give an estimate of the value of the
security. In the latter case, he may be admitted as a petitioning creditor to
the extent of the balance of the debt due to him after deducting the value so
estimated in the same way as if he were an unsecured creditor.
10. Conditions on which debtor may petition.– (1) A debtor
shall not be entitled to present an insolvency petition, unless he is unable to
pay his debts and-
(a) his debts amount to
five hundred rupees; or
[16][(aa) * * * * * * * * * * *]
(b) he is under arrest
or imprisonment in execution of the decree of any Court for the payment of
money; or
(c) an order of
attachment in execution of such a decree has been made, and is subsisting,
against his property.
(2) A debtor in respect of whom an order of
adjudication [17][made]
under this Act has been annulled, owing to his failure to apply, or to
prosecute an application for his discharge, shall not be entitled to
present an insolvency petition without the leave of the Court by which the
order of adjudication was annulled. Such Court shall not grant leave unless it
is satisfied either that the debtor was prevented by any reasonable cause from
presenting or prosecuting his application, as the case may be, or that the
petition is founded on facts substantially different from those contained in
the petition on which the order of adjudication was made.
11. Court to which petition shall be presented.–
Every insolvency petition shall be presented to a Court having jurisdiction
under this Act in any local area in which the debtor ordinarily resides or
carries on business, or personally works for gain, or if he has been arrested
or imprisoned, where he is in custody:
Provided that no objection as to the place
of presentment shall be allowed by any Court in the exercise of appellate or revisional jurisdiction unless such objection was taken in
the Court by which the petition was heard at the earliest possible opportunity,
and unless there has been a consequent failure of justice.
12. Verification of petitions.– Every
insolvency petition shall be in writing and shall be signed and verified in the
manner prescribed by the Code of Civil Procedure, 1908, for signing and
verifying plaints.
13. Contains of petition.– (1) Every
insolvency petition presented by a debtor shall contain the following
particulars, namely:-
(a) a statement that the
debtor is unable to pay his debts;
(b) the place where he
ordinarily resides or carries on business or personally works for gain, or, if
he has been arrested or imprisoned, the place where he is in custody;
(c) the Court (if any) by whose order he has been
arrested or imprisoned, or by which an order has been made for the attachment
of his property, together with particulars of the decree in respect of which
any such order has been made;
(d) the amount and
particulars of all pecuniary claims against him, together with the names and
residences of his creditors so far as they are known to, or can by the exercise
of reasonable care and diligence be ascertained by him;
(e) the amount and
particulars of all his property, together with–
(i) a specification of
the value of all such property not consisting of money;
(ii) the place or places at which any such
property is to be found; and
(iii) a declaration of his willingness to place at
the disposal of the Court of such property save in so far as it includes such
particulars (not being his books of account) as are exempted by the Code of
Civil Procedure, 1908, or by any other enactment for the time being in force
from liability to attachment and sale in execution of a decree;
(f) a statement whether
the debtor has on any previous occasion filed a petition to be adjudged an
insolvent, and (where such a petition has been filed)–
(i) if such petition has
been dismissed, the reasons for such dismissal, or
(ii) if the debtor has
been adjusted an insolvent, concise particulars of the insolvency, including a
statement whether any previous adjudication has been annulled and, if so, the
grounds therefor.
(2) Every insolvency petition presented by a
creditor or creditors shall set forth the particulars regarding the debtor
specified in clause (b) of sub-section (1), and shall also specify–
(a) the act of insolvency
committed by such debtor, together with the date of its commission; and
(b) the amount and
particulars of his or their pecuniary claim or claims against such debtor.
14. Withdrawal of petitions.– No petition, whether
presented by a debtor or by a creditor, shall be withdrawn without the leave of
the Court.
15. Consolidation of petitions.– Where two or
more insolvency petitions are presented against the same debtor, or where
separate petitions are presented against joint debtors, the Court may
consolidate the proceedings or any of them, on such terms as the Court thinks
fit.
16. Power to change carriage of
proceedings.– Where the petitioner does not proceed with due diligence
on his petition, the Court may substitute as petitioner any other creditor to
whom the debtor may be indebted in the amount required by this Act in the case
of a petitioning creditor.
17. Continuance of proceedings on death of debtor.– If a debtor by
or against whom an insolvency petition has been presented dies, the proceedings
in the matter shall, unless the Court otherwise orders, be continued so far as
may be necessary for the realisation and distribution of the property of the
debtor.
18. Procedure for admission of
petition.– The procedure laid
down in the Code of Civil Procedure, 1908, with respect to the admission of
plaints, shall, so far as it applicable, be followed in the case of insolvency
petitions.
19. Procedure on admission of petition.–
(1) Where an insolvency petition is admitted, the Court shall make an order
fixing a date for hearing the petition.
(2) Notice
of the order under sub-section (1) shall be given to creditors in such manner
as may be prescribed.
(3) Where
the debtor is not the petitioner, notice of the order under sub-section (1)
shall be served on him in the manner provided for the service of summons.
20. Appointment of interim receiver.– The Court when making an order admitting the petition
may, and where the debtor is the petitioner ordinarily shall, appoint an
interim receiver of the property of the debtor or of any part thereof, and may
direct him to take immediate possession thereof or of any part thereof, and the
interim receiver shall thereupon have such of the powers conferrable on a
receiver appointed under the Code of Civil Procedure, 1908, as the Court may
direct. If an interim receiver is not so appointed, the Court may make such
appointment at any subsequent time before adjudication, and the provisions of [18][this section] shall apply accordingly.
21. Interim proceeding against debtor.– At the time of
making an order admitting the petition or at any subsequent time before
adjudication, the Court may either of its own motion or on the application of
any creditor make one or more of the following orders, namely:-
(1) order the debtor to give reasonable security
for his appearance until final orders are made upon the petition, and direct
that, in default of giving such security, he shall be detained in the civil
prison;
(2) order the attachment
by actual seizure of the whole or any part of the property in the possession or
under the control of the debtor, other than such particulars (not being his
books of account) as are exempted by the Code of Civil Procedure, 1908, or by
any other enactment for the time being in force from liability to attachment
and sale in execution of a decree;
(3) order a warrant to issue with or without bail
for the arrest of the debtor, and direct either that he be detained in the
civil prison until the disposal of the petition, or that he be released on such
terms as to security as may be reasonable and necessary:
Provided that an order under clause (2) or
clause (3) shall not be made unless the Court is satisfied that the debtor,
with intent to defeat or delay his creditors or to avoid any process of the
Court,–
(i) has absconded or has
departed from the local limits of the jurisdiction of the Court, or is about to
abscond or to depart from such limits, or is remaining outside them, or
(ii) has failed to disclose or has concealed,
destroyed, transferred or removed from such limits, or is about to conceal,
destroy, transfer or remove from such limits, any documents likely to be of use
to his creditors in the course of the hearing, or any part of his property
other than such particulars as aforesaid.
22. Duties of debtors.– The debtor shall, on the making of an order admitting the petition,
produce all books of account, and shall at any time thereafter give such
inventories of his property, and such lists of his creditors and debtors and of
the debts due to and from them, respectively, submit to such examination in
respect of his property or his creditors, attend at such times before the Court
or receiver, execute such instruments, and generally do all such acts and
things in relation to his property as may be required by the Court or receiver,
or as may be prescribed.
23. Release of debtor.– (1) At the time
of making an order admitting the petition or at any subsequent time before
adjudication, the Court may, if the debtor is under arrest or imprisonment in
execution of the decree of any Court for the payment of money, order his
release on such terms as to security as may be reasonable and necessary.
(2) The
Court may at any time order any person who has been released under this section
to be re-arrested and re-committed to the custody from which he was released.
(3) At
the time of making any order under this section, the Court shall record in
writing its reasons therefor.
24. Procedure at hearing.– (1) On the day
fixed for the hearing of the petition, or on any subsequent day to which the
hearing may be adjourned, the Court shall require proof of the following
matters, namely:-
(a) that the creditor or
the debtor, as the case may be, is entitled to present the petition:
Provided
that, where the debtor is the petitioner, he shall, for the purpose of proving
his inability to pay his debts, be required to furnish only such proof as to
satisfy the Court that there are prima facie grounds for believing the
same and the Court, if and when so satisfied, shall not be bound to hear any
further evidence thereon;
(b) that the debtor, if
he does not appear on a petition presented by a creditor, has been served with
notice of the order admitting the petition; and
(c) that the debtor has
committed the act of insolvency alleged against him.
(2) The Court shall also examine the debtor, if he
is present, as to his conduct, dealings and property in the presence of such
creditors as appear at the hearing, and the creditors shall have the right to
question the debtor thereon.
(3) The
Court shall, if sufficient cause is shown, grant time to the debtor or to any
creditor to produce any evidence which appears to it to be necessary for the
proper disposal of the petition.
(4) A
memorandum of the substance of the examination of the debtor and of any other
oral evidence given shall be made by the Judge, and shall form part of the
record of the case.
25. Dismissal of petition.– (1) In the case
of a petition presented by a creditor, where the Court is not satisfied with
the proof of his right to present the petition or of the service on the debtor
of notice of the order admitting the petition, or of the alleged act of
insolvency, or is satisfied by the debtor that he is able to pay his debts, or
that for any other sufficient cause no order ought to be made, the Court shall
dismiss the petition.
(2) In
the case of a petition presented by a debtor, the Court shall dismiss the
petition if it is not satisfied of his right to present the petition.
26. Award of compensation.– (1) Where a petition presented by a creditor is dismissed under
sub-section (1) of section 25, and the Court is satisfied that the petition was
frivolous or vexatious, the Court may, on the application of the debtor, award
against such creditor such amount, not exceeding one thousand rupees, as it
deems a reasonable compensation to the debtor for the expense or injury
occasioned to him by the petition and the proceedings thereon, and such amount
may be realised as if it were a fine.
(2) An award under this section shall bar
any suit for compensation in respect of such petition and the proceedings
thereon.
Order of
Adjudication
27. Order of adjudications.– (1) If the
Court does not dismiss the petition, it shall make an order of adjudication,
and shall specify in such order the period within which the debtor shall apply
for his discharge.
(2) The
Court may, if sufficient cause is shown, extend the period within which the
debtor shall apply for his discharge, and in that case shall publish notice of
the order in such manner as it thinks fit.
28. Effect of an
order of adjudication.– (1) On the making of an order of adjudication, the insolvent shall aid
to the utmost of his power in the realisation of his property and the
distribution of the proceeds among his creditors.
(2) On
the making of an order of adjudication, the whole of the property of the
insolvent shall vest in the Court or in a receiver as hereinafter provided, and
shall become divisible among the creditors, and thereafter, except as provided
by this Act, no creditor to whom the insolvent is indebted in respect of any
debt provable under this Act shall during the pendency of the insolvency
proceedings have any remedy against the property of the insolvent in respect of
the debt, or commence any suit or other legal proceeding, except with the leave
of the Court and on such terms as the Court may impose.
(3) For the purposes of sub-section (2), all goods
being at the date of the presentation of the petition on which the order is made,
in the possession, order or disposition of the insolvent in his trade or
business, by the consent and permission of the true owner, under such
circumstances that he is the reputed owner thereof, shall be deemed to be the
property of the insolvent.
(4) All
property which is acquired by or devolves on the insolvent after the date of an
order of adjudication and before his discharge shall forthwith vest in the
Court or receiver, and the provisions of sub-section (2) shall apply in respect
thereof.
(5) The property of the insolvent for the purposes
of this section shall not include any property (not being books of account)
which is exempted by the Code of Civil Procedure, 1908, or by any other
enactment for the time being in force from liability to attachment and sale in
execution of a decree.
(6) Nothing
in this section shall affect the power of any secured creditor to realise or
otherwise deal with his security, in the same manner as he would have been
entitled to realise or deal with it if this section had not been passed.
(7) An
order of adjudication shall relate back to, and take effect from, the date of
the presentation of the petition on which it is made.
29. Stay of pending proceeding.– Any Court in which a suit or other proceeding is pending against a
debtor shall, on proof that an order of adjudication has been made against him
under this Act, either stay the proceeding, or allow it to continue on such
terms as such Court may impose.
30. Publication of order of
adjudication.– Notice of an order
of adjudication stating the name, address and description of the insolvent, the
date of the adjudication, the period within which the debtor shall apply for
his discharge, and the Court by which the adjudication is made, shall be
published in the [19][official Gazette] and in such other manner as may be prescribed.
Proceedings
consequent on order of Adjudication
31. Protection order.– (1) Any
insolvent in respect of whom an order of adjudication has been made may apply
to the Court for protection, and the Court may on such application make an
order for the protection of the insolvent from arrest or detention.
(2) A
protection order may apply either to all the debts of the debtor, or to any of
them as the Court may think proper, and may commence and take effect at and for
such time as the Court may direct, and may be revoked or renewed as the Court
may think fit.
(3) A
protection order shall protect the insolvent from being arrested or detained in
prison for any debt to which such order applies, and any insolvent arrested or
detained contrary to the terms of such an order shall be entitled to his
release:
Provided that
no such order shall operate to prejudice the rights of any creditor in the
event of such order being revoked or the adjudication annulled.
(4) Any
creditor shall be entitled to appear and oppose the grant of a protection
order.
32. Power to arrest after adjudication.– At any time
after an order of adjudication has been made, the Court may, if it has reason
to believe on the application of any creditor or the receiver that the debtor
has absconded or departed from the local limits of its jurisdiction with intent
to avoid any obligation which has been, or might be, imposed on him by or under
this Act, order a warrant to issue for his arrest, and on his appearing or
being brought before it, may, if satisfied that he was absconding or had
departed with such intent, order his release on such terms as to security as
may be reasonable or necessary, or, if such security is not furnished, direct
that he shall be detained in the civil prison for a period which may extend to
three months.
33. Schedule of creditors.– (1) When an
order of adjudication has been made under this Act, all persons alleging
themselves to be creditors of the insolvent in respect of debts provable under
this Act shall tender proof of their respective debts by producing evidence of
the amount and particulars thereof, and the Court shall, by order, determine
the persons who have proved themselves to be creditors of the insolvent in respect
of such debts, and the amount of such debts, respectively, and shall frame a
schedule of such persons and debts:
Provided that, if, in the opinion of the
Court, the value of any debt is incapable of being fairly estimated, the Court
may make an order to that effect, and thereupon the debt shall not be included
in the schedule.
(2) A
copy of every such schedule shall be posted in the Court-house.
(3) Any
creditor of the insolvent may, at any time before the discharge of the
insolvent, tender proof of his debt and apply to the Court for an order
directing his name to be entered in the schedule as a creditor in respect of
any debt provable under this Act, and not entered in the schedule, and the
Court, after causing notice to be served on the [20][receiver] and
the other creditors who have proved their debts, and hearing their objections
(if any), shall comply with or reject the application.
34. Debts provable under the Act.– (1) Debts which
have been excluded from the schedule on the ground that their value is
incapable of being fairly estimated and demands in the nature of unliquidated damages arising otherwise than by reason of a
contract or a breach of trust shall not be provable under this Act.
(2) Save
as provided by sub-section (1), all debts and liabilities, present or future,
certain or contingent, to which the debtor is subject when he is adjudged an
insolvent, or to which he may become subject before his discharge by reason of
any obligation incurred before the date of such adjudication, shall be deemed
to be debts provable under this Act.
Annulment of
Adjudication
35. Power to annul adjudication of insolvency.– Where, in the
opinion of the Court, a debtor ought not to have been adjudged insolvent, or
where it is proved to the satisfaction of the Court that the debts of the
insolvent have been paid in full, the Court shall, on the application of the
debtor, or of any other person interested, by order in writing, annul the
adjudication [21][and the Court
may, of its own motion or on application made by the receiver or any creditor,
annul any adjudication made on the petition of a debtor who was, by reason of
the provisions of sub-section (2) of section 10, not entitled to present such
petition].
36. Power to cancel one of
concurrent orders of adjudication.– If, in any case in which an order of adjudication has been made, it
shall be proved to the Court by which such order was made that insolvency
proceedings are pending in another Court against the same debtor, and that the
property of the debtor can be more conveniently distributed by such other
Court, the Court may annul the adjudication or stay all proceedings thereon.
37. Proceedings on annulment.– (1) Where an adjudication is annulled, all sales and dispositions of
property and payments duly made, and all acts theretofore done, by the Court or
receiver, shall be valid; but, subject as aforesaid, the property of the debtor
who was adjudged insolvent shall vest in such person as the Court may appoint,
or, in default of any such appointment, shall revert to the debtor to the
extent of his right or interest therein on such conditions (if any) as the
Court may, by order in writing, declare.
(2) Notice
of every order annulling an adjudication shall be
published in the [22][official
Gazette] and in such other manner as may be prescribed.
Compositions and
schemes of arrangement
38. Compositions and schemes of arrangement.–
(1) Where a debtor, after the making of an order of adjudication, submits a
proposal for a composition in satisfaction of his debts, or a proposal for a
scheme of arrangement of his affairs, the Court shall fix a date for the
consideration of the proposal, and shall issue a notice to all creditors in
such manner as may be prescribed.
(2) If,
on the consideration of the proposal, a majority in number and three-fourths in
value of all the creditors whose debts are proved and who are present in person
or by pleader, resolve to accept the proposal, the same shall be deemed to be
duly accepted by the creditors.
(3) The
debtor may at the meeting amend the terms of his proposal if the amendment is,
in the opinion of the Court, calculated to benefit the general body of
creditors.
(4) Where
the Court is of opinion, after hearing the report of the receiver, if a
receiver has been appointed, and after considering any objections which may be
made by or on behalf of any creditor, that the terms of the proposal are not
reasonable or are not calculated to benefit the general body of creditors, the
Court shall refuse to approve the proposal.
(5) If
any facts are proved on proof of which the Court would be required either to
refuse, suspend or attach conditions to the debtor's discharge, the Court shall
refuse to approve the proposal unless it provides reasonable security for
payment of not less than six annas in the rupee on
all the unsecured debts provable against the debtor's estate.
(6) No
composition or scheme shall be approved by the Court which
does not provide for the payment in priority to other debts of all debts
directed to be so paid in the distribution of the property of an insolvent.
(7) In
any other case the Court may either approve or refuse to approve the proposal.
39. Order on approval.– If the Court
approves the proposal, the terms shall be embodied in an order of the Court,
and [23][***] the order
of adjudication shall be annulled, and the provisions of section 37 shall
apply, and the composition or scheme shall be binding on all the creditors [24][so far as
relates to any debt due to them from the debtor and provable under this Act].
40. Power to re-adjudge debtor insolvent.– If default is
made in the payment of any installment due in pursuance of the composition or
scheme, or if it appears to the Court that the composition or scheme cannot
proceed without injustice or undue delay, or that the approval of the Court was
obtained by fraud, the Court may, if it thinks fit, re-adjudge the debtor
insolvent and annul the composition or scheme but without prejudice to the
validity of any transfer or payment duly made or of anything duly done under or
in pursuance of the composition or scheme. When a debtor is re-adjudged
insolvent under this section, all debts provable in other respects which have
been contracted before the date of such re-adjudication shall be provable in
the insolvency.
Discharge
41. Discharge.– (1) A debtor
may, at any time after the order of adjudication and shall, within the period
specified by the Court, apply to the Court for an order of discharge, and the
Court shall fix a day, notice whereof shall be given in such manner as may be
prescribed, for hearing such application, and any objections which may be made
thereto.
(2) Subject
to the provisions of this section, the Court may, after considering the
objections of any creditor and, where a receiver has been appointed, the report
of the receiver–
(a) grant or refuse an
absolute order of discharge; or
(b) suspend the operation
of the order for a specified time; or
(c) grant an order of discharge subject to any conditions with
respect to any earnings or income which may afterwards become due to insolvent
or with respect to his after-acquired property.
42. Cases in which Court must refuse an absolute
discharge.–
(1) The Court shall refuse to grant an absolute order of discharge under
section 41 on proof of any of the following facts, namely:-
(a) that
the insolvent’s assets are not of a value equal to eight annas
in the rupee on the amount of his unsecured liabilities unless he satisfies the
Court that the fact that the assets are not of a value equal to eight annas in the rupee on the amount of his unsecured
liabilities has arisen from circumstances for which he cannot justly be held
responsible;
(b) that
the insolvent has omitted to keep such books of account as are usual and proper
in the business carried on by him and as sufficiently disclose his business
transactions and financial position within the three years immediately
preceding his insolvency;
(c) that the insolvent
has continued to trade after knowing himself to be insolvent;
(d) that the insolvent has contracted any debt
provable under this Act without having at the time of contracting it any
reasonable or probable ground of expectation (the burden of proving which shall
lie on him) that he would be able to pay it;
(e) that the insolvent
has failed to account satisfactorily for any loss of assets or for any
deficiency of assets to meet his liabilities;
(f) that
the insolvent has brought on or contributed to his insolvency by rash and
hazardous speculations, or by unjustifiable extravagance in living, or by
gambling, or by culpable neglect of his business affairs;
(g) that
the insolvent has within three months preceding the date of the presentation of
the petition, when unable to pay his debts as they became due given an undue
preference to any of his creditors;
(h) that the insolvent has on any previous occasion been
adjudged an insolvent or made a composition or arrangement with his creditors;
(i) that the insolvent
has concealed or removed his property or any part thereof, or has been guilty
of any other fraud or fraudulent breach of trust.
(2) For
the purposes of this section, the report of the receiver shall be deemed to be
evidence; and the Court may presume the correctness of any statement contained
therein.
(3) The
powers of suspending, and of attaching conditions to, an insolvent's discharge
may be exercised concurrently.
43. Adjudication to be annulled on failure to apply
for discharge.– (1) If the debtor does not appear on
the day fixed for hearing his application for discharge or on such subsequent
day as the Court may direct, or if the debtor does not apply for an order of
discharge within the period specified by the Court, the order of adjudication
shall be annulled, and the provisions of section 37 shall apply accordingly.
(2) Where
a debtor has been released from custody under the provisions of this Act and
the order of adjudication is annulled under sub-section (1), the Court may, if
it thinks fit, re-commit the debtor to his former custody, and the officer incharge of the prison to whose custody such debtor is so
re-committed shall receive such debtor into his custody according to such
re-commitment, and thereupon all processes which were in force against the
person of such debtor at the time of such release as aforesaid shall be deemed
to be still in force against him as if no order of adjudication had been made.
44. Effect of order of discharge.– (1) An order of
discharge shall not release the insolvent from–
(a) any debt due to the [25][Federal
Government or a Provincial Government];
(b) any debt or
liability incurred by means of any fraud or fraudulent breach of trust to which
he was a party;
(c) any debt or
liability in respect of which he has obtained forbearance by any fraud to which
he was a party; or
[26][(d) any
liability under an order for the maintenance of a wife or child.]
(2) Save as otherwise provided by sub-section (1),
an order of discharge shall release the insolvent from all debts provable under
this Act.
(3) An
order of discharge shall not release any person who, at the date of the
presentation of the petition, was a partner or co-trustee with the insolvent,
or was jointly bound or had made any joint contract with him or any person who
was surety for him.
Part III
Administration of Property
Method of proof
of debts
45. Debts payable at a future time.–
A creditor may prove for a debt not payable when the debtor is adjudged an
insolvent as if it were payable presently, and may receive dividends equally
with the other creditors, deducting therefrom only a rebate of interest at the
rate of six per centum per annum computed from the declaration of a dividend to
the time when the debt would have become payable, according to the terms on
which it was contracted.
46. Mutual dealing and set-off.– Where there
have been mutual dealings between an insolvent and a creditor proving or
claiming to prove a debt under this Act, an account shall be taken of what is
due from the one party to the other in respect of such mutual dealings, and the
sum due from the one party shall be set-off against any sum due from the other
party, and the balance of the account, and no more, shall be claimed or paid on
either side respectively.
47. Secured creditors.– (1) Where a
secured creditor realises his security, he may prove for the balance due to
him, after deducting the net amount realised.
(2) Where
a secured creditor relinquishes his security for the general benefit of the
creditors, he may prove for his whole debt.
(3) Where
a secured creditor does not either realise or relinquish his security, he
shall, before being entitled to have his debt entered in the schedule, state in
his proof the particulars of his security, and the value at which he assesses
it, and shall be entitled to receive a dividend only in respect of the balance
due to him after deducting the value so assessed.
(4) Where
a security is so valued, the Court may at any time before realisation redeem it
on payment to the creditor of the assessed value.
(5) Where
a creditor, after having valued his security, subsequently realises it, the net
amount realised shall be substituted for the amount of any valuation previously
made by the creditor, and shall be treated in all respects as an amended
valuation made by the creditor.
(6) Where
a secured creditor does not comply with the provisions of this section, he
shall be excluded from all share in any dividend.
48. Interest.– (1) On any debt or sum certain
whereon interest is not reserved or agreed for, and which is overdue when the
debtor is adjudged an insolvent, and which is provable under this Act, the
creditor may prove for interest at a rate not exceeding six per centum per
annum–
(a) if the debt or sum is
payable by virtue of a written instrument at a certain time, from the time when
such debt or sum was payable to the date of such adjudication; or
(b) if the debt or sum is payable otherwise, from
the time when a demand in writing has been made giving the debtor notice that
interest will be claimed from the date of the demand until the time of payment
to the date of such adjudication.
(2) Where
a debt which has been proved under this Act includes interest or any pecuniary
consideration in lieu of interest, the interest or consideration shall, for the
purposes of dividend, be calculated at a rate not exceeding six per centum per
annum, without prejudice to the right of a creditor to receive out of the
debtor's estate any higher rate of interest to which he may be entitled after
all the debts proved have been paid in full.
49. Mode of proof.– (1) A debt may
be proved under this Act by delivering, or sending by post in a registered
letter, to the Court an affidavit verifying the debt.
(2) The
affidavit shall contain or refer to a statement of account showing the
particulars of the debt, and shall specify the vouchers (if any) by which the
same can be substantiated. The Court may at any time call for the production of
the vouchers.
50. Disallowance and reduction of entries in
schedule.–
(1) Where the receiver thinks that a debt has been improperly entered in the
schedule, the Court may, on the application of the receiver and after notice to
the creditor, and such inquiry (if any) as the Court thinks necessary, expunge
such entry or reduce the amount of the debt.
(2) The Court may also, after like inquiry,
expunge an entry or reduce the amount of a debt upon the application of a
creditor where no receiver has been appointed, or where the receiver declines
to interfere in the matter or, in the case of a composition or scheme, upon the
application of the debtor.
Effect of
insolvency on antecedent transactions
51. Restriction of rights of creditor under
execution.– (1) Where execution of a decree has
issued against the property of a debtor, no person shall be entitled to the
benefit of the execution against the receiver except in respect of assets realised
in the course of the execution by sale or otherwise before the date of the
admission of the petition.
(2) Nothing
in this section shall affect the rights of a secured creditor in respect of the
property against which the decree is executed.
(3) A
person who in good faith purchases the property of a debtor under a sale in
execution shall in all cases acquire a good title to it against the receiver.
52. Duties of Court executing decree as to property
taken in execution.–
Where execution of a decree has issued against any property of a debtor which
is saleable in execution and before the sale thereof notice is given to the
Court executing the decree that an insolvency petition by or against the debtor
has been admitted, the Court shall, on application, direct the property, if in
the possession of the Court, to be delivered to the receiver, but the costs of
the suit in which the decree was made and of the execution shall be a first
charge on the property so delivered, and the receiver may sell the property or
an adequate part thereof for the purpose of satisfying the charge.
53. Avoidance of voluntary transfer.–
Any transfer of property not being a transfer made before and in consideration
of marriage or made in favour of a purchaser or incumbrancer in good faith and
for valuable consideration shall, if the transferor is adjudged insolvent [27][on a petition
presented] within two years after the date of the transfer, be voidable as
against the receiver and may be annulled by the Court.
54. Avoidance of preference in certain cases.– (1) Every
transfer of property, every payment made, every obligation incurred, and every
judicial proceeding taken or suffered by any person unable to pay his debts as
they become due from his own money in favour of any creditor, with a view of
giving that creditor a preference over the other creditors, shall, if such
person is adjudged insolvent on a petition presented within three months after
the date thereof, be deemed fraudulent and void as against the receiver, and
shall be annulled by the Court.
(2) This
section shall not affect the rights of any person who in good faith and for
valuable consideration has acquired a title through or under a creditor of the
insolvent.
[28][54A. By whom
petitions for annulment may be made.– A petition for
the annulment of any transfer under section 53, or of any transfer, payment,
obligation or judicial proceeding under section 54, may be made by the receiver
or, with the leave of the Court, by any creditor who has proved his debt and
who satisfies the Court that the receiver has been requested and has refused to
make such petition.]
55. Protection of bona fide
transactions.– Subject to the
foregoing provisions of this Act with respect to the effect of insolvency on an
execution, and with respect to the avoidance of certain transfers and
preferences, nothing in this Act shall invalidate in the case of an insolvency–
(a) any payment by the
insolvent to any of his creditors;
(b) any payment or
delivery to the insolvent;
(c) any transfer by the
insolvent for valuable consideration; or
(d) any contract or
dealing by or with the insolvent for valuable consideration:
Provided that
any such transaction takes place before the date of the order of adjudication,
and that the person with whom such transaction takes place has not at the time
notice of the presentation of any insolvency petition by or against the debtor.
Realisation of Property
56. Appointment of receiver.– (1) The Court may, at the time of the order of
adjudication, or at any time afterwards, appoint a receiver for the property of
the insolvent, and such property shall thereupon vest in such receiver.
(2) Subject
to such conditions as may be prescribed, the Court may–
(a) require the receiver
to give such security as it thinks fit duly to account for what he shall
receive in respect of the property; and
(b) by general or special
order, fix the amount to be paid as remuneration for the services of the
receiver out of the assets of the insolvent.
(3) Where
the Court appoints a receiver, it may remove the person in whose possession or
custody any such property as aforesaid is from the possession or custody
thereof:
Provided that nothing in
this section shall be deemed to authorise the Court to remove from the
possession or custody of property any person whom the insolvent has not a
present right so to remove.
(4) Where
a receiver appointed under this section–
(a) fails to submit his
accounts at such periods and in such form as the Court directs, or
(b) to pay the balance due from him thereon as the Court
directs, or
(c) occasions loss to the
property by his wilful default or gross negligence,
the Court may direct his property to
be attached and sold, and may apply the proceeds to make good any balance found
to be due from him or any loss so occasioned by him.
(5) The
provisions of this section shall apply, so far as may be, to interim receivers
appointed under section 20.
57. Power to appoint Official Receivers.–
(1) The [29][Government] may
appoint such persons as it thinks fit (to be called “Official Receivers”) to be
receivers under this Act within such local limits as it may prescribe.
(2) Where
any Official Receiver has been so appointed for the local limits of the
jurisdiction of any Court having jurisdiction under this Act, he shall be the
receiver for the purpose of every order appointing a receiver or an interim
receiver issued by any such Court, unless the Court for special reasons
otherwise directs.
(3) Any
sum payable under clause (b) of sub-section (2) of section 56 in respect of the
services of an Official Receiver shall be credited to such fund as the [30][Government] may
direct.
(4) Every
Official Receiver shall receive such remuneration out of the said fund or
otherwise as the [31][Government] may
fix in this behalf, and no remuneration whatever beyond that so fixed shall be
received by the Official Receiver as such.
58. Powers of Court if no receiver appointed.– Where no
receiver is appointed, the Court shall have all the rights of, and may exercise
all the powers conferred on, a receiver under this Act.
59. Duties and powers of receiver.– Subject to the
provisions of this Act, the receiver shall, with all convenient speed, realise
the property of the debtor and distribute dividends among the creditors
entitled thereto, and for that purpose may–
(a) sell all or any part
of the property of the insolvent;
(b) give receipts for any
money received by him;
and may, by leave of the Court, do all or any of the following things,
namely:-
(c) carry on the business
of the insolvent so far as may be necessary for the beneficial winding up of
the same;
(d) institute, defend or
continue any suit or other legal proceeding relating to the property of the
insolvent;
(e) employ a pleader or
other agent to take any proceedings or do any business which may be sanctioned
by the Court;
(f) accept as the
consideration for the sale of any property of the insolvent a sum of money
payable at a future time subject to such stipulations as to security and
otherwise as the Court thinks fit;
(g) mortgage or pledge
any part of the property of the insolvent for the purpose of raising money for
the payment of his debts;
(h) refer any dispute to
arbitration, and compromise all debts, claims and liabilities, on such terms as
may be agreed upon; and
(i) divide
in its existing form amongst the creditors, according to its estimated value,
any property which, from its peculiar nature or other special circumstances,
cannot readily or advantageously be sold.
[32][59A. Power to require information regarding
insolvent’s property.– (1) The Court, if specially empowered in this
behalf by an order of the [33][Government], or
any officer of the Court so empowered by a like order, may, on the application
of the receiver or any creditor who has proved his debt, at any time after an
order of adjudication has been made, summon before it in the prescribed manner
any person known or suspected to have in his possession any property belonging
to the insolvent, or supposed to be indebted to the insolvent, or any person
whom the Court or such officer, as the case may be, may deem capable of giving
information respecting the insolvent or his dealings or property; and the Court
or such officer may require any such person to produce any documents in his
custody or power relating to the insolvent or to his dealings or property.
(2) If
any person so summoned, after having been tendered a reasonable sum, refuses to
come before the Court or such officer at the time appointed, or refuses to
produce any such document, having no lawful impediment made known to and
allowed by the Court or such officer, the Court or such officer may, by
warrant, cause him to be apprehended and brought up for examination.
(3) The
Court or such officer may examine any person so brought before it or him concerning
the insolvent, his dealings or property, and such person may be represented by
a legal practitioner.]
60. Special provisions in regard to immoveable
property.– (1) In any local area in which a
declaration has been made under section 68 of the Code of Civil Procedure,
1908, and is in force, no sale of immoveable property paying revenue to the
Government or held or let for agricultural purposes shall be made by the
receiver; but, after the other property of the insolvent has been realised, the
Court shall ascertain–
(a) the amount required
to satisfy the debts proved under this Act after deducting the monies already
received;
(b) the immoveable
property of the insolvent remaining unsold; and
(c) the incumbrances (if any) existing thereon;
and
shall forward a statement to the Collector containing the particulars
aforesaid; and thereupon the Collector shall proceed to raise the amount so
required by the exercise of such of the powers conferred on him by paragraphs 2
to 10 of the Third Schedule to the said Code as he thinks fit, and subject to
the provisions of those paragraphs so far as they are applicable, and shall
hold at the disposal of the Court all sums that may come to his hands by the
exercise of such powers.
(2) Nothing
in this Act shall be deemed to affect any provisions of any enactment for the
time being in force prohibiting or restricting the execution of decrees or
orders against immoveable property; and any such provisions shall be deemed to
apply to the enforcement of an order of adjudication made under this Act as if
it were such a decree or order.
[34][(3) In particular and without prejudice to the
generality of sub-section (2), when the whole or any part of the estate of an
insolvent consists of land, such land shall not be temporarily alienated by the
receiver; but after the other property of the insolvent has been realized, the
Court shall proceed in the manner provided in sub-section (1), and the
Collector shall thereupon proceed to raise the amount required by means of a
temporary alienation in such form and for such period as may be legally
permissible and as he thinks fit, and shall hold at the disposal of the Court
all sums which may thereby come to his hand:
Provided
that such portions of the land shall be exempted from alienation as in the opinion
of the Collector, having regard to the income of the judgment-debtor from all
sources except such income as is dependent on the will of another person, is
sufficient to provide for the maintenance of the insolvent and members of his
family who are dependent on him, and such portion shall be deemed not to form
part of the estate under administration.
Explanation– For purposes
of sub-section (3), land means land which is not occupied as the site of any
building in a town or village and is occupied or has been let for agricultural
purposes or for purposes subservient to agriculture or for pasture, and
includes the sites of buildings and other structures on such land.]
Distribution of
Property
61. Priority of debts.– (1) In the
distribution of the property of the insolvent, there shall be paid in priority
to all other debts–
(a) all debts due to the [35][Federal
Government or to a Provincial Government or to a local Government]; and
(b) all
salary or wages, not exceeding twenty rupees in all, of any clerk, servant or
labourer in respect of services rendered to the insolvent during four months
before the date of the presentation of the petition.
(2) The
debts specified in sub-section (1) shall rank equally between themselves, and
shall be paid in full, unless the property of the insolvent is insufficient to
meet them, in which case they shall abate in equal proportions between
themselves.
(3) Subject
to the retention of such sums as may be necessary for the expenses of
administration or otherwise, the debts specific in sub-section (1) shall be
discharged forthwith in so far as the property of the insolvent is sufficient
to meet them.
(4) In
the case of partners, the partnership property shall be applicable in the first
instance in payment of the partnership debts, and the separate property of each
partner shall be applicable in the first instance in payment of his separate
debts. Where there is a surplus of the separate property of the partners, it
shall be dealt with as part of the partnership property; and where there is a
surplus of the partnership property, it shall be dealt with as part of the
respective separate property in proportion to the rights and interests of each
partner in the partnership property.
(5) Subject
to the provisions of this Act, all debts entered in the schedule shall be paid rateably according to the amounts of such debts
respectively and without any preference.
(6) Where
there is any surplus after payment of the foregoing debts, it shall be applied
in payment of interest from the date on which the debtor is adjudged an
insolvent at the rate of six per centum per annum on all debts entered in the
schedule.
62. Calculation of dividends.– (1) In the
calculation of dividends, the receiver shall retain in his hands sufficient
assets to meet–
(a) debts provable under this Act and appearing,
from the insolvent's statements or otherwise, to be due to persons resident in
places so distant that in the ordinary course of communication they have not
had sufficient time to tender their proofs;
(b) debts
provable under this Act, the subject of claims not yet determined;
(c) disputed proofs or
claims; and
(d) the
expenses necessary for the administration of the estate or otherwise.
(2) Subject to the provisions of
sub-section (1), all money in hand shall be distributed as dividends.
63. Right of creditor who has not proved debt
before declaration of a dividend.– Any creditor who has not proved his
debt before the declaration of any dividend or dividends shall be entitled to
be paid, out of any money for the time being in the hands of the receiver, any
dividend or dividends which he may have failed to receive before that money is
applied to the payment of any future dividend or dividends; but he shall not be
entitled to disturb the distribution of any dividend declared before his debt
was proved by reason that he has not participated therein.
64. Final dividend.– When the
receiver has realised all the property of the insolvent or so much thereof as
can, in the opinion of the Court, be realised without needlessly protracting
the receivership he shall declare a final dividend; but before so doing, he
shall give notice in manner prescribed to the persons whose claims to be
creditors have been notified but not proved, that if they do not prove their
claims within the time limited by the notice, he will proceed to make a final
dividend without regard to their claims. After the expiration of the time so
limited, or if the Court, on application by any such claimant, grants him
further time for establishing his claim, then on the expiration of such further
time, the property of the insolvent shall be divided among the creditors
entered in the schedule without regard to the claims of any other persons.
65. No suit for dividend.– No suit for a
dividend shall lie against the receiver; but where the receiver refuses to pay
any dividend, the Court may, on the application of any creditor who is entered
in the schedule, order him to pay it, and also to pay out of his own money
interest thereon for the time that it is withheld, and the costs of the
application.
66. Management by and allowance to insolvent.–
(1) The Court may appoint the insolvent himself to superintend the management
of the property of the insolvent or of any part thereof, or to carry on the trade
(if any) of the insolvent for the benefit of the creditors, and in any other
respect to aid in administering the property in such manner and on such terms
as the Court may direct.
(2) The
Court may, from time to time, make such allowance as it may think just to the
insolvent out of his property for the support of himself and his family, or in
consideration of his services if he is engaged in winding up his estate; but
any such allowance may, at any time, be varied or determined by the Court.
67. Right of insolvent to surplus.– The insolvent shall be entitled to any surplus remaining
after payment in full of his creditors with interest as provided by this Act,
and of the expenses of the proceedings taken thereunder.
[36][67A. Committee
of inspection.– (1) The Court may. if it thinks fit,
authorise the creditors who have proved their debts to appoint a committee of
inspection for the purpose of superintending the administration of the
insolvent's property by the receiver.
(2) The
persons appointed to a committee of inspection shall be creditors who have
proved their debts or persons holding general powers-of-attorney from such
creditors.
(3) The
committee of inspection shall have such powers of control over the proceedings
of the receiver as may be prescribed.]
Appeal to Court
against receiver
68. Appeal to Court against
receiver.– If the insolvent or any of the creditors or any other
person is aggrieved by any act or decision of the receiver, he may apply to the
Court, and the Court may confirm, reverse or modify the act or decision
complained of, and make such order as it thinks just:
Provided that no application under this
section shall be entertained after the expiration of twenty-one days from the
date of the act or decision complained of.
Part IV
Penalties
69. Offences by debtors.– If a debtor,
whether before or after the making of an order of adjudication,–
(a) wilfully fails to
perform the duties imposed on him by section 22 or to deliver up possession of
any part of his property which is divisible among his creditors under this Act,
and which is for the time being in his possession or under his control to the
Court or to any person authorised by the Court to take possession of it, or
(b) fraudulently with
intent to conceal the state of his affairs or to defeat the objects of this
Act,–
(i) has destroyed or otherwise wilfully prevented
or purposely withheld the production of any document relating to such of his
affairs as are subject to investigation under this Act, or
(ii) has kept or caused
to be kept false books, or
(iii) has made false entries in or withheld entries
from or wilfully altered or falsified any document relating to such of his
affairs as are subject to investigation under this Act, or
(c) fraudulently with
intent to diminish the sum to be divided among his creditors or to give an
undue preference to any of his creditors,-
(i) has discharged or
concealed any debt due to or from him, or
(ii) has made away with,
charged, mortgaged or concealed any part of his property of any kind whatsoever,
he shall be punishable on
conviction [37][* * *] with
imprisonment which may extend to one year.
[38][70. Procedure on charge under section 69.– Where the Court is satisfied, after such preliminary inquiry, if any,
as it thinks necessary, that there is ground for inquiring into any offence
referred to in section 69 and appearing to have been committed by the
insolvent, the Court may record a finding to that effect and make a complaint
of the offence in writing to a Magistrate of the first class having
jurisdiction, and such Magistrate shall deal with such complaint in the manner
laid down in the Code of Criminal Procedure, 1898.]
71. Criminal liability after discharge or
composition.–
Where an insolvent has been guilty of any of the offences specified in section
69, he shall not be exempt from being proceeded against therefor by reason that
he has obtained his discharge or that a composition or scheme of arrangement
has been accepted or approved.
72. Undischarged
insolvent obtaining credit.– (1) An undischarged insolvent obtaining
credit to the extent of fifty rupees or upwards from any person without
informing such person that he is an undischarged insolvent shall, on conviction
by a Magistrate, be punishable with imprisonment for a term which may extend to
six months, or with fine or with both.
(2) Where the Court has reason to believe that an
undischarged insolvent has committed the offence referred to in sub-section
(1), the Court, after making any preliminary inquiry that may be necessary, may
send the case for trial to the nearest Magistrate of the first class, and may
send the accused in custody or take sufficient security for his appearance
before such Magistrate; and may bind over any person to appear and give
evidence on such trial.
73. Disqualifications of insolvent.–
(1) Where a debtor is adjudged or re-adjudged insolvent under this Act, he
shall, subject to the provisions of this section be disqualified from–
(a) being appointed or
acting as a Magistrate;
(b) being elected to any
office of any [39][local
government] where the appointment to such office is by election or holding or
exercising any such office to which no salary is attached; and
(c) being
elected or sitting or voting as member of any [40][local government].
(2) The
disqualifications which an insolvent is subject to under this section shall be
removed, and shall cease if–
(a) the order of
adjudication is annulled under section 35, or
(b) he obtains from the
Court an order of discharge, whether absolute or conditional, with a certificate
that his insolvency was caused by misfortune without any misconduct on his
part.
(3) The
Court may grant or refuse such certificate as it thinks fit, but any order of
refusal shall be subject to appeal.
Part V
Summary Administration
74. Summary administration.– When a petition
is presented by or against a debtor, if the Court is satisfied by affidavit or
otherwise that the property of the debtor is not likely to exceed in value five
hundred rupees[41], the Court may
make an order that the debtor's estate be administered in a summary manner, and
thereupon the provisions of this Act shall be subject to the following
modifications, namely:-
(i) unless the Court
otherwise directs, no notice required under this Act shall be published in the [42][official Gazette];
(ii) on the admission of
a petition by a debtor, the property of the debtor shall vest in the Court as a
receiver;
(iii) at the hearing of
the petition, the Court shall inquire into the debts and assets of the debtor
and determine the same by order in writing, and it shall not be necessary to
frame a schedule under the provisions of section 33;
(iv) the property of the
debtor shall be realised with all reasonable dispatch and thereafter, when
practicable, distributed in a single dividend;
(v) the debtor shall
apply for his discharge within six months from the date of adjudication; and
(vi) such other
modifications as may be prescribed with the view of saving expense and
simplifying procedure:
Provided that the Court may at any time
direct that the ordinary procedure provided for in this Act shall be followed
in regard to the debtor's estate, and thereafter the Act shall have effect
accordingly.
Part VI
Appeals
75. Appeals.– (1) The debtor,
any creditor, the receiver or any other person aggrieved by a decision come to
or an order made in the exercise of insolvency jurisdiction by a Court
subordinate to a District Court may appeal to the District Court, and the order
of the District Court upon such appeal shall be final:
Provided that [43][Lahore High
Court], for the purpose of satisfying itself that an order made in any appeal
decided by the District Court was according to law, may call for the case and
pass such order with respect thereto as it thinks fit:
Provided further that any such person aggrieved
by a decision of the District Court on appeal from a decision of a subordinate
Court under section 4 may appeal to [44][Lahore High
Court] on any of the grounds mentioned in sub-section (1) of section 100 of the
Code of Civil Procedure, 1908.
(2) Any
such person aggrieved by any such decision or order of a District Court as is
specified in Schedule I, come to or made otherwise than in appeal from an order
made by a subordinate Court, may appeal to [45][Lahore High
Court].
(3) Any
such person aggrieved by any other order made by a District Court otherwise
than in appeal from an order made by a subordinate Court may appeal to [46][Lahore High
Court] by leave of the District Court or of [47][Lahore High
Court].
(4) The
periods of limitation for appeals to the District Court and to [48][Lahore High
Court] under this section shall be thirty days and ninety days, respectively.
Part VII
Miscellaneous
76. Costs.– The costs of any proceeding under this
Act, including the costs of maintaining a debtor in the civil prison, shall,
subject to any rules made under this Act, be in the discretion of the Court in
which the proceeding is had.
77. Courts to be auxiliary to each
other.– All Courts having jurisdiction in insolvency and the
officers of such Courts, respectively, shall severally act in aid of and be
auxiliary to each other in all matters of insolvency, and an order of a Court
seeking aid with a request to another of the said Courts shall be deemed
sufficient to enable the latter Court to exercise, in regard to the matters
directed by the order, such jurisdiction as either of such Courts could
exercise in regard to similar matters within their respective jurisdictions.
78. Limitation.– (1) The provisions of sections 5
and 12 of the Limitation Act, 1908, shall apply to appeals, and applications
under this Act, and for the purpose of the said section 12, a decision under
section 4 shall be deemed to be a decree.
(2) Where
an order of adjudication has been annulled under this Act, in computing the
period of limitation prescribed for any suit or application for the execution
of a decree (other than a suit or application in respect of which the leave of
the Court was obtained under sub-section (2) of section 28 which might have
been brought or made but for the making of an order of adjudication under this
Act, the period from the date of the order of adjudication to the date of the
order of annulment shall be excluded:
Provided that nothing in
this section shall apply to a suit or application in respect of a debt provable
but not proved under this Act.
79. Power to make rules.– [49][(1) [50][Lahore High
Court] may, with the previous sanction of the [51][Government],
make rules for carrying into effect the provisions of this Act.]
(2) In
particular and without prejudice to the generality of the foregoing power, such
rules may provide–
(a) for the appointment
and remuneration of receivers (other than Official Receivers), the audit of the
accounts of all receivers and the costs of such audit,
(b) for meetings of
creditors,
(c) for the procedure to be followed where the debtor is a firm,
[52][* * *]
(d) for the procedure to
be followed in the case of estates to be administered in a summary manner, [53][and
(e) for any matter which
is to be or may be prescribed.]
(3) All
rules made under this section shall be published [54][* * *] in the [55][official
Gazette] [56][* * *] and
shall, on such publication, have effect as if enacted in this Act.
80. Delegation of powers to Official Receivers.– (1) [57][Lahore High
Court], with the like sanction, may from time to time direct that, in any
matters in respect of which jurisdiction is given to the Court by this Act, the
Official Receiver shall, subject to the directions of the Court, have all or
any of the following powers, namely:-
[58][(a) * * * * *
* * * * * * *]
(b) to frame schedules
and to admit or reject proofs of creditors;
[59][(c) * * * * *
* * * * * * *]
[60][(d) * * * * *
* * * * * * *]
(e) to make interim
orders in any case of urgency; and
(f) to hear and
determine any unopposed or ex-parte application.
(2) Subject
to the appeal to the Court provided for by section 68, any order made or act
done by the Official Receiver in the exercise of the said powers shall be
deemed the order or act of the Court.
81. Power of [61][Government] to bar application of certain
provisions to certain Courts.– [62][The Government]
[63][* * *] may, by
notification in the [64][official
Gazette], declare that any of the provisions of this Act specified in Schedule
II shall not apply to insolvency proceedings in any Court or Courts having jurisdiction
under this Act in any part of the territories administered by [65][the
Government].
[66][82. Savings.– * * * * * * * * * *
*]
83. Repeal.– [67][(1) * * * * * * * * * * *]
(2) Where
in any enactment or instrument in force at the date of the commencement of this
Act, reference is made to Chapter XX (of Insolvent Judgment-debtors) of the
Code of Civil Procedure, 1877, or of the Code of Civil Procedure, 1882, or to
any section of either of those Chapters, such reference shall, so far as may be
practicable, be construed as applying to this Act or to the corresponding
section thereof.
Schedule I
[See section 75(2)]
Decisions and Orders
from which an appeal lies to [68][Lahore
High Court] under section 75 (2).
|
Section |
Nature of
decision or orders |
|
4 |
Decision
of questions of title, priority, etc., arising in insolvency. |
|
25 |
Order
dismissing a petition. |
|
26 |
Order
awarding compensation. |
|
27 |
Order
of adjudication. |
|
33 |
Orders
regarding entries in the schedule. |
|
35 |
Order
annulling adjudication. |
|
37 |
Order
declaring the conditions on which the debtor's property shall revert to him
on annulment of adjudication. |
|
41 |
Order
on application for discharge. |
|
50 |
Order
disallowing or reducing entries in the schedule. |
|
53 |
Order
annulling a voluntary transfer. |
|
54 |
Decision
that a transfer of property is a preference in favour of a creditor. |
|
[69][69 |
* * * * * * * * * * * *] |
Schedule II
(See section 81)
Provisions of the Act application of which may be barred by [70][Government].
|
Provision of
the Act |
|
Subject |
|
Section |
|
|
|
26 |
|
Award
of compensation. |
|
28, sub-section (3) |
|
Reputed
property of an insolvent. |
|
34 |
|
Debts
provable under the Act. |
|
38 |
|
Compositions
and schemes of arrangement. |
|
39 |
||
|
40 |
||
|
42, sub-sections (1) and (2) |
|
Obligation
to refuse absolute discharge. |
|
45 |
|
Method
of proof of debts. |
|
46 |
||
|
47 |
||
|
48 |
||
|
49 |
||
|
50 |
||
|
51 |
|
Effect
of insolvency on antecedent transactions. |
|
52 |
||
|
53 |
||
|
54 |
||
|
55 |
||
|
|
|
Priority
of debts. |
|
62 |
|
Dividends. |
|
63 |
||
|
64 |
||
|
65 |
||
|
66 |
|
Management
by and allowance to insolvent. |
|
72 |
|
Penalty
for obtaining of credit by undischarged insolvent. |
Schedule III
Enactments Repealed
[71][* * * * *]